Summary of the final rule, which will repeal and replace CEA Part 35, generally permitting the transaction of swaps in an agricultural commodity subject to all rules and regulations applicable to any other swap:

New Part 35 will permit the transaction of swaps in an agricultural commodity subject to all provisions of the CEA – and any rule, regulation, or order thereunder – applicable to all other swaps.

New Part 35 will also explicitly provide that swaps in an agricultural commodity may transact on a swap execution facility (SEF) and/or Designated Contract Market Regulation|designated contract market]] (DCM) to the same extent that any other swap may transact on a SEF and/or DCM.

On April 7, 2011, the CFTC and the SEC released a joint study on algorithmic derivatives descriptions. After conducting its analysis, which included meetings with industry leaders, regulators, and academics, as well as comments submitted by the public, the staff offered conclusions. more>

Asset-backed securities (ABS) are created by buying and bundling loans – such as residential mortgage loans, commercial loans or student loans – and creating securities backed by those assets, which are then sold to investors. During the financial crisis, ABS holders suffered significant losses. The crisis revealed that many investors were not fully aware of the risk in the underlying mortgages within the pools of securitized assets.

At an open meeting on January 20, 2011, the SEC finalized rules requiring an issuer of asset-backed securities (ABS) to "perform a review of the assets underlying the ABS and disclose information relating to the review." Rules regarding shelf eligibility conditions for asset-backed securities were re-proposed on July 26, 2011. On October 13, 2010, the SEC adopted an interim final temporary Rule 13Aa-2T concerning the reporting of security-based swap data. Also introduced at this meeting was a new proposed rule to "mitigate conflicts of interest at security-based swap clearing agencies, security-based swap execution facilities, and national security exchanges that post or make available for trading security-based swaps." more>

The SEC meeting on June 22, 2011 finalized rules concerning amendments to the Investment Advisers Act of 1940, as well as registration exemptions for reporting by certain investment advisers. An SEC notice concerning investment adviser performance compensation regulation was published on May 10, 2011. The comment deadline for this proposal is July 11, 2011. more>

Among the provisions of the Dodd-Frank Act are several requirements affecting commodity trading advisors (CTAs), commodity pool operators (CPOs) and investment advisors to private funds. The Securities and Exchange Commission submitted a proposed rule on systemic risk reporting requirements for private fund advisers including hedge funds, CPOs and CTAs in February 2011; the rules became finalized in October 2011.

The Commodity Futures Trading Commission participated in the joint rulemaking with the SEC on the reporting requirements, and also proposed its own rules on certain compliance aspects for CPOs and CTAs. These rules were finalized in February 2012. more>

Among the provisions of the Dodd-Frank Act are several requirements affecting commodity trading advisors (CTAs), commodity pool operators (CPOs) and investment advisors to private funds. The Securities and Exchange Commission submitted a proposed rule on systemic risk reporting requirements for private fund advisers including hedge funds, CPOs and CTAs in February 2011; the rules became finalized in October 2011.

The Commodity Futures Trading Commission participated in the joint rulemaking with the SEC on the reporting requirements, and also proposed its own rules on certain compliance aspects for CPOs and CTAs. These rules were finalized in February 2012. more>

[[[SEC Final Rule: Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF]]

Among the provisions of Title VII of the Dodd-Frank Act is a requirement that swaps reforms shall not apply to activities outside the United States unless those activities have “a direct and significant connection with activities in, or effect on, commerce of the United States.” The CFTC is tasked with developing a framework for oversight of the swaps market, and to adapt the Commodity Exchange Act to include swaps oversight. The SEC is tasked with developing a framework for oversight of security-based swaps, and to adapt the SEC regulations to include such oversight.

The concern is that swap trading by foreign affiliates of large financial entities pose a systemic risk to the U.S., and thus should be under CFTC jurisdiction. This guidance is meant to be the starting point for discussion with market participants regarding the structure of cross-border jurisdiction. more>

After the financial crisis of 2008 and the passage of the Dodd-Frank Act in 2010, enhancing customer protection has emerged as a major issue. Dodd-Frank contains several provisions intended to restore confidence in the financial markets, including:

At an open meeting on May 10, 2012, the CFTC finalized rules, guidance and acceptable practices under Dodd-Frank Act that, among other things, amend Section 5 of the Commodity Exchange Act ("CEA") concerning designation and operation of contract markets, and add a new CEA Section 2(h)(8) to include the listing, trading and execution of swaps on designated contract markets. The rules were originally proposed on December 1, 2010. more>

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), named after Senate Banking Committee Chairman Chris Dodd and Chairman of the House Financial Services Committee Barney Frank, was signed into law by President Barack Obama on July 21, 2010. more>

The Dodd-Frank Act requires, among other things, that the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC), create and implement rules regarding mandatory clearing of swaps transactions. A major topic of contention has been whether end-users should be granted an exception to the Dodd-Frank requirement for mandatory clearing of swap transactions. At its July 10, 2012 open meeting the CFTC approved a final rulemaking that implements an exception to the clearing requirement for non-financial entities and small financial institutions that use swaps to hedge or mitigate commercial risk ("commercial end-users"). more>

Title IX of the Dodd-Frank Act aims to update and enhance investor protection and improve protections in U.S. securities markets. Among its provisions are five sections related to executive compensation:

Section 952, which requires disclosure about the role of, and potential conflicts involving, compensation consultants; VIEW FINAL RULE

Section 953, which requires disclosure on compensation practices such as pay-for-performance and ratios between CEO and median compensation; VIEW PROPOSED RULE

Section 954, which aims to require compensation claw-back policies; and

Section 955, which requires disclosure about whether company directors are permitted to hedge decreases in market value of the company's stock. VIEW PROPOSED RULE

In 2011 and 2012 the Securities and Exchange Commission (SEC) first proposed and then began finalizing rules related to executive compensation. In the fall of 2013, the commission proposed a rule requiring the disclosure of the ratio CEO pay to that of the median employee. more>

Discussions surrounding possible changes in the regulation of financial benchmarks such as the London Interbank Offered Rate (LIBOR) began in 2012, in the wake of an ongoing scandal involving widespread manipulation of rate submissions by participant banks. While the initial round of fines assessed by regulators such as the CFTC and U.K. Financial Services Authority against Barclays, UBS and the Royal bank of Scotland concentrated on manipulation of LIBOR, the scandal has since widened to include other financial benchmarks such as Euribor, Yen Libor and Swiss Libor.

In one of the most gut-wrenching hours in Wall Street history, the Dow Jones Industrial Average (DJIA) plunged almost 1,000 points in early afternoon trade on May 6, 2010 before recovering to close down 348.This move represented the biggest one-day point decline on an intraday basis in Dow Jones history. The drop became known in the industry as the "flash crash" of May 6.

A subsequent report pointed to a large order in the S&P 500 futures as the trigger, but that the move was exacerbated by fears about the European debt crisis.

Also, in March 2013, the SEC issued its proposed rule, Regulation SCI, Systems Compliance and Integrity, under which self-regulatory organizations, certain alternative trading systems, plan processors, and certain exempt clearing agencies would be required to carefully design, develop, test, maintain, and surveil systems that are integral to their operations.

On September 9, 2013, the CFTC issued a concept release on risk controls and system safeguards for automated trading environments. The release offers a snapshot of the automated trading environment, and presents a system that would involve:

pre-trade risk controls;

post trade reports and other measures;

system safeguards related to the design, testing and supervision of automated trading systems (ATSs); and

additional protections designed to promote safe and orderly markets. more>

At its March 20, 2012 open meeting, the CFTC approved a final rulemaking covering clearing member risk management, clearing documentation and timing of acceptance for clearing, and allocation of bunched orders.

The Dodd-Frank Act requires most swaps to be traded on an exchange or on a similar system and then guaranteed by a clearinghouse, where the parties would be required to post collateral. However, the act allows the Secretary of the Treasury to make a final determination as to whether foreign exchange transactions should be granted an exemption from the Dodd-Frank definition of swaps. On November 16, 2012, the U.S. Department of the Treasury issued it final determination that effectively exempts FX swaps and forwards from mandatory derivatives requirements, including central clearing and exchange trading. more>

The SEC meeting on June 22, 2011 finalized rules concerning amendments to the Investment Advisers Act of 1940, as well as registration exemptions for reporting by certain investment advisers. An SEC notice concerning investment adviser performance compensation regulation was published on May 10, 2011. The comment deadline for this proposal is July 11, 2011. more>

OTC derivatives are instruments traded in venues other than on organized exchanges, or designated contract markets. Subsequent to financial crises, which many say were exacerbated by the "opacity" of the unregulated OTC markets, regulators in the United States and abroad have begun enacting and implementing rules concerning OTC derivatives. Most notably, these regulations include the Dodd-Frank Act in the U.S., Markets in Financial Instruments Directive (MiFID) and EMIR in Europe, and international efforts such as Basel III. more>

On September 10, 2010, the CFTC approved its final rules regarding off-exchange retail foreign exchange transactions. Although the rulemaking pre-dated the Dodd-Frank Act, once the Act was signed in July 2010, the commission's forex rules, along with the forex rules of other regulatory authorities, became a part of Dodd-Frank. Under Dodd-Frank, the CFTC will have jurisdiction over retail foreign exchange transactions, except in the case of entities which fall under the authority of one of the following regulatory agencies ("Prudential Regulators"):

The Act requires that such rules include appropriate requirements with respect to disclosure, record keeping, capital and margin, reporting, business conduct, documentation, and any other standards or requirements as Federal regulatory agencies shall determine to be necessary. more>

In accordance with Title II of the Dodd-Frank Act, the FDIC is required to establish rules regarding the orderly liquidation in case of a default of a "covered financial company," which is defined as financial company that poses significant risk to the financial stability of the United States. The Act outlines the process for the orderly liquidation of such a covered financial company following the FDIC’s appointment as receiver and provides for additional implementation of the orderly liquidation authority (OLA) by rulemaking. more>

Position limits are intended to protect futures markets from excessive speculation that could cause unreasonable or unwarranted price fluctuations and are sometimes referred to as "speculative position limits", or "speculative limits". The Commodity Exchange Act (CEA) authorized the CFTC to impose limits on the size of speculative positions in futures markets.

The CFTC issued its final rules on position limits in October 2011. Compliance for spot month positions was to become effective on October 12, 2012, but in September 2012, a U.S. District Court vacated the rule and remanded it back to the CFTC. Though the commission initially filed an appeal of the ruling, it opted instead to withdraw the appeal and redraft a proposed rule, which was approved on November 5, 2013. The proposal entered the Federal Register on December 12, 2013, but the comment period has been reopened three times in 2014. more>

The SEC has issued two rule proposals regarding the security-based swap data repositories (SDRs) and the reporting and dissemination of swap data through Regulation SBSR. Neither rulemaking has been finalized. more>

The Securities and Exchange Commission (SEC) has also issued several rulemakings regarding security-based swap dealers and major swap participants (SB-SD/MSPs). Topics for which rules have been proposed but not finalized include business conduct standards, registration, and swap entity definitions (joint rule with CFTC). The final rulemaking on swap entity definitions, also issued jointly between the CFTC and SEC, was issued on April 18, 2012.

In late 2011, the CFTC began issuing final rules pertaining to SD/MSPs. As of September 2012, the CFTC had finalized all rules except those pertaining to uncleared swaps, margin and capital requirements. Aside from the definitions rules, which were approved jointly with the CFTC, the SEC has not finalized any rules. Topics for which a final rulemaking has been issued can be found in the alert box at the top of the page. Summaries and links can also be found below.

Swap execution facilities (SEFs) were given life by the Dodd-Frank Act, which requires over-the counter (OTC) swaps to be cleared and traded on this new type of regulated platform. Any swap that is "made available to trade" must trade on designated contract market or a SEF. The CFTC has been given the responsibility to monitor swap execution facilities; the SEC has jurisdiction over security-based SEFs.

The CFTC made its first determinations on January 16, 2014, making February 15, 2014 the date at which the first swaps will be subject to the execution requirements. Subsequent determinations were made on January 26 and 28. For more information on rulemakings related to swap execution facilities, click here.

Fixed-to-Floating Interest Rate Swap, USD

Mandatory Execution Begins

Feb. 15, 2014

Feb. 15, 2014

Feb. 21, 2014

Floating Rate Indexes

USD LIBOR (3,6 Mo.)

USD LIBOR (3,6 Mo.)

USD LIBOR

Trade Start Type

Spot Starting (T+2)

IMM Start Date (next two quarterly IMM start dates)

IMM Start Date (next two quarterly IMM start dates)

Optionality

No

No

No

Fixed Leg Specs

Semi-annual, Annual pmt

30/360, Actual/360 day count

Semi-annual, Annual pmt

30/360, Actual/360 day count

Semi-annual pmt

30/360 day count

Floating Leg Specs

Quarterly reset (3 Mo LIBOR), semi-annual reset (3 or6 Mo LIBOR)

Actual/360 day count

Quarterly reset (3 Mo LIBOR), semi-annual reset (3 or6 Mo LIBOR)

Actual/360 day count

Quarterly, semi-annual reset

Actual/360 day count

Dual Currencies

No

No

No

Notional

Fixed Notional

Fixed Notional

Fixed Notional

Fixed Rate

Par

Par

Standard Coupon

Tenors

2, 3, 4, 5, 6, 7, 10, 12, 15, 20, 30 years

2, 3, 4, 5, 6, 7, 10, 12, 15, 20, 30 years

1, 2, 3, 4, 5, 7, 10, 15, 20, 30 years

Holiday Calendar

NY/London

NY/London

NY/London

Fixed-to-Floating Interest Rate Swap, Non-USD

Mandatory Execution Begins

Feb. 26, 2014

Feb. 15, 2014

Floating Rate Indexes

Sterling (GBP) (3, 6 Mo.)

EURIBOR (Euro)

Trade Start Type

Spot Starting (T+0)

Spot Starting (T+2)

Optionality

No

No

Fixed Leg Specs

Quarterly, Semi-annual pmt

Actual/365 day count

Semi-annual, Annual pmt

30/360, Actual/360 day count

Floating Leg Specs

Quarterly reset (3 Mo. GBP LIBOR, semi-annual reset (6 Mo. GBP LIBOR)

Actual/365 day count

Quarterly reset (3 Mo. EURIBOR), semi-annual reset (6 Mo. EURIBOR)

Actual/360 day count

Dual Currencies

No

No

Notional

Fixed Notional

Fixed Notional

Fixed Rate

Par

Par

Tenors

2, 3, 4, 5, 6, 7, 10, 15, 20, 30 years

2, 3, 4, 5, 6, 7, 10, 15, 20, 30 years

Holiday Calendar

London

TARGET

Untranched Credit Default Swap Indices

Mandatory Execution Begins

Feb. 26, 2014

Feb. 26, 2014

Reference Entities

Corporate

Corporate

Region

North America

Europe

Indices

CDX.NA.IG (North American Investment Grade CDS))

CDX.NA.HY (North American High Grade CDS)

iTraxx Europe (125 Most Actively Traded Names)

iTraxx Europe Crossover (Sub-investment Grade)

Tenor

CDX.NA.IG 5Y

CDX.NA.HY 5Y

iTraxx Europe 5Y

iTraxx Europe Crossover 5Y

Applicable Series

At any time, the then-current on-the-run series and the preceding series that was replaced by the current one

In accordance with the Dodd-Frank Act, the CFTC and the SEC, in consultation with the Board of Governors of the Federal Reserve System, have proposed rules and interpretative guidance under the Commodity Exchange Act (CEA) and the Securities Exchange Act of 1934 to further define the terms "swap dealer," "security-based swap dealer," "major swap participant," "major security-based swap participant," and "eligible contract participant."

Under Dodd-Frank, the SEC will have jurisdiction over "security-based" swaps, and the CFTC will have jurisdiction over all other swaps, except for a category known as "mixed swaps" which may have both security-based and non-security-based components. For mixed swaps, the two agencies will have joint oversight responsibilities.

Swaps definitions fall into two categories. "Entity definitions" detail which firms and individuals fall are considered to be subject to dealer and swap participant rules. "Product definitions" detail the types of transactions that are considered to be swaps, security-based swaps, and mixed swaps, and also which products may be exempt from agency oversight. more>

The document details which entities will be subject to the prohibitions, and explains the types of financial transactions that will be exempt from the bans. The Dodd-Frank Act mandated that the rule become effective on July 21, 2012, followed by a two-year compliance transition. However, a delay in the release of the rule has pushed the effective date to April 1, 2014 and banking entities will have until July 21, 2015 to come into compliance - three years after the date mandated by Dodd-Frank. Banks with $50 billion or more in trading assets will be required to report certain metrics to regulators beginning in July 2014. more>

At an open meeting on May 25, 2011, the SEC issued its final rule under which the whistleblower, in order to be eligible, must "voluntarily provide the SEC with original information that leads to the successful enforcement by the SEC of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million.” more>

The Bank for International Settlements (BIS) is an international organization, established in 1930, that fosters the cooperation of central banks and international financial institutions. While headquartered in Basel, Switzerland, the BIS has two representative offices in the Hong Kong and Mexico City. The BIS assists central banks and other official monetary institutions in the management of their foreign exchange and gold reserves. more>

The European Securities and Markets Authority (ESMA) is an independent European Union regulatory agency that oversees European securities trading across all of the EU member states. ESMA is a part of the European System of Financial Supervision, which consists of the European Systemic Risk Board (ESRB) and the three European Supervisory Authorities: ESMA based in Paris, the European Banking Authority (EBA) based in London and the European Insurance and Occupational Pensions Authority (EIOPA) based in Frankfurt. ESMA works closely with the EBA, the ESRB and the EIOPA in order to ensure unity among securities regulators and across various financial sectors.

ESMA was established on January 1, 2011 as part of a new regulatory framework adopted by the EU in the wake of the financial crisis and has replaced the Committee of European Securities Regulators (CESR). Steven Maijoor is the current chairman of ESMA. The executive director is Verena Ross and the vice president is Carlos Tavares. more>

The Federal Deposit Insurance Corporation (FDIC) was created by Congress though the Glass-Steagall Act in 1933 in response the frequent bank failures of the 1920s and early 1930s. As an independent agency, the FDIC is charged with maintaining stability in the U.S. financial system by insuring deposits, supervising financial institutions and managing receiverships.

Additionally, one of the provisions of the Dodd-Frank Act required the FDIC to establish rules regarding the orderly liquidation of any systemically important financial company encountering a default. more>

As established under Title I of the Dodd-Frank Act, the Financial Stability Oversight Council (FSOC) provides, for the first time, comprehensive monitoring to ensure the stability of our nation's financial system. It was passed by the House Financial Services Committee on December 2, 2009 to put an end to “too big to fail” financial firms. It was created as a nine-member council, led by the Treasury secretary, to look out for systemic risks. The FSOC will subject to Fed oversight any nonbank financial companies whose financial distress would pose risks to the financial stability of the United States.more>

The Advisory Committee on Emerging Regulatory Issues was created on May 11, 2010, five days after the so-called "flash crash" on May 6, 2010, when a single trader mistakenly entered a "sell" order of CME Group's e-Mini S&P 500 futures worth $4.1 billion. The order triggered a frenzy of high frequency trading activity that briefly saw the Dow Jones Industrial Average break 700 points in a matter of minutes. While the market stabilized quickly once the error was discovered, the incident highlighted the potential liquidity problems associated with high speed trading. more>

The Financial Services Authority (FSA) was an independent non-governmental body that regulates the financial services industry in the UK. Established by Gordon Brown in 1997 when the Labour party came into power, the FSA was granted statutory powers by the Financial Services and Markets Act of 2000. After the FSA "failed to sound the alarm as the financial system went wrong" in 2008-2010, the U.K. made plans for the transfer of regulatory oversight from the FSA to the Bank of England. more>

Established by Title X of the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) will conduct rule-making and enforcement of consumer financial protection laws, promote financial education and monitor financial markets that affect consumers. Many parts of the Dodd-Frank Act relating to the CFPB are planned to go into effect on July 21, 2011. Treasury Secretary Timothy Geithner is charged with creating the CFPB. On September 17, 2010, Elizabeth Warren was named Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB. On July 17, 2011, Richard Cordray was nominated as Director of the CFPB, having formerly served as head of the enforcement division at the agency. more>

The mission of the Commodity Futures Trading Commission (CFTC) is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and options markets. more>

The U.S. Securities and Exchange Commission (SEC) is the U.S. regulatory agency charged with the oversight of securities markets and market participants in the U.S. Its mission is to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation. Mary L. Schapiro is the current chairman of the SEC. more>

Background

On October 26, 2010, the commission first addresses the issue of disruptive trading practices. An advance notice of proposed rulemaking (ANPR) was approved at the meeting, and entered the Federal Register on November 2, 2010. The ANPR solicited comments from the public to address 19 questions, including:

distinguishing between orderly and disorderly trading practices;

defining "orderly execution;"

defining and distinguishing "spoofing" from legitimate market practices; and

if and how to hold accountable a market participant who violates orderly market practices.

On December 2, 2010, the CFTC held a staff roundtable on disruptive practices. Panelists included representatives of U.S. financial exchanges, traders and brokers, industry associations, academic institutions, and regulators.[2] Among the comments from the roundtable panelists:

concern about the vagueness of the provisions and ambiguity of the standards;

difficulty in determining whether a bid or offer is violated in the over-the-counter (OTC) market;

After taking into consideration the comments from letters and roundtable panelists, the commission decided that, rather than issue a final rule proposal regarding disruptive practices, the regulator would instead issue an interpretive order; an addendum to existing rules. When final, the interpretive order would have the same legal force and effect as a final rule.[4] The final order was approved at the CFTC Open Meeting, May 16, 2013.